Quasi-hedge funds market in Poland in view of their performance persistence

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Performance persistence analysis is important as it has a decisive influence on investor allocation decisions. Investors can use quasi-hedge funds’ persistence to build effective investment strategies. Thus, the paper explores performance persistence of quasi-hedge funds operating at the Polish capital market. The methodology is based on constructing the new market performance index intended only for absolute return funds. It is validated regarding absolute returns of Polish quasi-hedge funds. The Absolute Return Index (ARI) is used to rate quasi-hedge funds’ performance persistence in assessing their fundamental purpose: to deliver consistently positive returns in all market conditions. For this, their quarterly return rates are used. All 53 funds operating for at least 36 months and representing 48.2% of the entire segment of absolute return funds are analyzed. The use of ARI allows examining quasi-hedge funds’ performance persistence in terms of market changes and the assessment of their purpose. In the short term (6 months) profitability remained persistent, while in the long term (12 months) such a hypothesis could be refuted. More than 40% of funds showed positive persistence within six months; only positive persistence occurred in the short term. 9.4% of funds repeatedly obtained negative returns, so absolute return funds’ negative performance persisted neither in the short nor long term. Closed-ended investment funds showed much stronger persistence of above-average positive returns, which additionally tended to avoid repeating negative returns in two-quarter and four-quarter series. This confirms the assumption that in this respect the Polish market is similar to the developed ones.

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    • Table 1. Performance persistence of FIO and SFIO absolute return funds in 2005–2017
    • Table 2. Performance persistence of FIZ absolute return funds in 2005–2017
    • Table 3. Quarterly return and risk for FIO and SFIO in 2005–2017
    • Table 4. Quarterly return and risk for FIZ in 2005–2017
    • Table 5. Proportion of Polish quasi-hedge funds showing performance persistence in 2005–2017
    • Table 6. Correlation coefficients of returns on assets for WIG, WIG20, WIG20USD, DAX, S&P500, hedge fund index BHFI and ARI in 1997–2017
    • Conceptualization
      Waldemar Aspadarec
    • Data curation
      Waldemar Aspadarec
    • Formal Analysis
      Waldemar Aspadarec
    • Investigation
      Waldemar Aspadarec
    • Methodology
      Waldemar Aspadarec
    • Project administration
      Waldemar Aspadarec
    • Supervision
      Waldemar Aspadarec
    • Validation
      Waldemar Aspadarec
    • Writing – original draft
      Waldemar Aspadarec
    • Writing – review & editing
      Waldemar Aspadarec